Outsourced and managed services in AP to stay strong

The cause for optimism is primarily due to continued demand for managed services and outsourcing.

SINGAPORE, 5 DECEMBER 2008 - Vendors should rejoice; the services market for the Asia Pacific region remains healthy and can grow to US$49.4 billion in 2009, according to analyst firm IDC.

The cause for optimism is primarily due to continued demand for managed services and outsourcing as cost management becomes a key focus for organisations in the region.

And this sector will be able to withstand the current challenging economic conditions, pointed out Philip Carter, associate research director for IDC's Asia Pacific IT services research. The impact on the services market has to be viewed from a number of perspectives and these are changing constantly but the point is that opportunities will be created.

As organisations respond to the poor market conditions, IDC expects opportunities to arise in the managed services space as companies move assets off their books and scrutinise their operating expenses.

While new support contracts in conjunction with new hardware sales are likely to decrease, part of this will be compensated by the fact that organisations will look to lengthen the lifecycle of existing infrastructure, and therefore delay refresh cycles, and will therefore look to procure extended support services as warranties expire.

From a vertical perspective, the public sector is expected to be a potential bright spot, as spend in this industry tends to be anti-cyclical in nature. Markets with good potential for government spend in IT services between 2009 and 2010 include Australia, Singapore, China, India & Hong Kong. Meanwhile, manufacturing, telecommunications, and retail businesses are expected to significantly lower capital expenditure spend and turn toward discrete outsourcing engagements as a result.

Mayur Sahni, senior market analyst for IDC's Asia Pacific IT services opportunities, added, "The IT service providers that will come out strongest in this economic turmoil will be those with the lowest-cost delivery of services aligned to strong business understanding, deep CxO relationships, strong balance sheets, good financing schemes, willingness to accept some risk, and who can position themselves credibly as long-term strategic partners to their customers. We will see a flight to quality' but quality that's backed by low-cost delivery of services."